Charles Edison

"Economics, politics, and personalities are often inseparable." - Charles Edison

Tuesday, April 12, 2011

Less Demand for gas?

http://usnews.rankingsandreviews.com/cars-trucks/daily-news/110412-Gas-Price-Rise-Americans-Drive-Less/

Unexpectedly as gas prices go up people are driving less. This didn't occur before when the gas price rose people remained to drive the same and consume the same amount. But as the gas prices are rising ( currently the national average is $3.60) people are consuming less putting strain on he economy in many ways both directly and indirectly. Gas prices are predicted to rise to $5 in the summer of 2011. This is due to a political unrest in the middle east and africa because they supply much of the United States oil. They are expected to continue to rise. This will make people drive less and consume less gas slowing down the business cycle in almost every way. This is so because if people drive less they're work might not necessarily be affected but there spending of the money will. If people slow down how much they drive they are cutting of the money flow for the gas companies along with every other company because people wont be going to stores to spend money as much as they used to. This happens because a larger portion of the salary would be going towards the cost of gas then in previous years thus creating a slow in the business cycle along with demand for products, the supply of products( becaus epeople will buy less so they will produce less). This could also drasticly affect employment and unemployment as well because companies will have to fire people to keep there profit in place as demand goes down.

8 comments:

Smith said...

I saw on the news two nights ago that analysts believe the major reason for the gas price increase is due to the devaluing of the dollar over the past year. What are your thoughts?

joseph said...

I believe that the devauling of the dollar is affecting the gas prices. However I do believe that the dollar hasn't devalued drasticly enough to affect the gas prices like political unrest would. With political unrest the actual amount of oil the the United States recieves is affected because it is an international business that some countries economy depends on. But if those countries are having problems with their own government then that country would be focusing more on itself and its economy. This could decrease the export of oil because there having bigger issues to deal with.

Brandeezy said...

I don't think the money we pay at gas stations goes directly into the American economy. Most of the oil comes from forign companies, they are the ones making the real money. Many of the compainies that transport and seperate the oil are even forign (BP).These rising prices do affect the American economy indirectly becouse things that are imported take oil to transport, and when the oil rises the price of the product rises also.

Tyler said...

These are the reasons that we need to lift the ban on drilling for oil in the U.S. We could stop being dependent on other countries for their oil and our prices could be affordable again. We could potentially be the 3rd largest oil producers in the world. It would help our nations debt. People could travel more and spend money on other things which would help the economy.

Garrett T. said...

I agree with tyler on this, the ban on U.S. is stupid. Maybe not drill Alaska per se, but the Gulf is clearly open for this. But not only is the marine life ready for gas leakages and crude oil but the recent failure has taught the U.S. to double its precaution.

mark said...

While you make some valid points, you have to remember that America's demand for oil is extremely inelastic. Until we find other means of obtaining any form of energy, we will always be dependant on foreign oil, no matter what the prices go up to. And not only is the country's demand for oil inelastic, the people's need for gas is inelastic as well. The solution though is to increase fuel economy on our cars, since people aren't going to give up driving because of gas prices. And i don't think that rising gas prices will have as much an effect on the economy as many people fear. Instead of taking multiple trips over longer distances, people are just going to get all their shopping done at one time at relatively closer locations.

-mark e.

Haley! said...

I somewhat agree with you Joseph - people are driving less to compensate for the price of gas, but no matter what, people will still drive and pay for gas. The demand for gas is inelastic and until the human population develops a safe and reliable method of dependancy other than gas, it will continue to remain inelastic. Business will not lose any revenue or "business" because they still have a strong income and revenue; the same amount of purchases less often but costing more for buyers. Entrepreneurs are only making prices higher because they can. The supply is the same but they are increasing prices because they can due to the media and current issues in the Middle East. The demand is still high and thus the price will be high as well. Honestly, until the United States can drill on our own land or in a place where the United States maintains a reliable relationship, oil companies will continue to make the prices of oil skyrocket for the reason solely that they can and people will continue to pay it. It's sickening for buyers, but its the way of business for them - its how they make their profit.

- Haley R

hayden said...

I agree with what you are saying but in some areas I don’t. I think that if the price goes up to $5 over the summer you will see less people driving than the previous summer, but I think more people will go on vacations and more teenagers will be out of school driving around looking for things to do. So over the summer I think that the economy will benefit from increasing the amount per gallon, because more people will be out having fun driving around, and teenagers don’t really pay attention to the gas price. I do also think that you will see more people selling their trucks and suburban’s to buy new fuel efficient cars that don’t consume so much gasoline. So the economy will also increase in that way also because more people will go car shopping because of this whole situation.